GE-Honeywell Union a Frenzied Deal
Monday, October 23rd 2000, 12:00 am
By: News On 6
NEW YORK (AP) â€” The battle for Honeywell International Inc. began just before the closing bell last Thursday when General Electric Co. chairman John F. Welch glanced up from the trading floor of the New York Stock Exchange to study the electronic ticker.
``I saw Honeywell go past up 10 points, and I damn near dropped,'' Welch said Monday.
Welch's realization that Honeywell was about to be sold to rival United Technologies Corp. set in motion one of the most frenzied weekends of his storied career, a headlong rush into corporate matrimony that swamped his well-scripted plans to retire.
``I've spent more time with Jack in the last 72 hours then I've spent with my wife,'' Honeywell chairman and chief executive Michael R. Bonsignore said Monday as he and a hoarse but still voluble Welch talked up the $42 billion deal, one of the biggest industrial takeovers ever.
The two men, sitting side-by-side in director's chairs on the soundstage that usually hosts ``Saturday Night Live,'' spoke so fondly of the merger it's seemed wondrous the deal hadn't happened sooner.
About 90 percent of GE businesses overlap with Honeywell's, yet there are few, if any overlaps in products, Welch said. The combination will strengthen GE's businesses across the board, and allow it to cull the best of Honeywell's work force, he said.
``We could've sat there and not done anything,'' to go after Honeywell, Welch said. ``But we decided we had to and we did.''
The boards of GE and Honeywell approved the deal Sunday, ending a chaotic weekend of negotiations that left little time for corporate pleasantries, Welch and Bonsignore said.
Welch began calling advisors after he heard about the UT-Honeywell deal late Thursday. By midmorning Friday, GE executives had put together an offer and were scrambling to get through to Bonsignore.
By day's end Friday, with UT executives withdrawing an offer reportedly worth $40 billion that had been in the works for weeks, negotiations between GE and Honeywell were rolling. By day's end Saturday, they'd progressed far enough that Welch stuck by his plans to go to the opening game of the World Series.
But it was too late to go by limousine, so he took his first ride ever on the D subway line in a rush to get to Yankee Stadium, Welch said. The game went on until after 1 a.m. Sunday, but later that morning the executives were back at the negotiating table.
Those negotiations included a focus on the status of Welch, who had already announced plans to retire this coming April. If there was to be a merged company, though, it almost certainly would have to include Welch, Bonsignore said.
``Without a commitment from Jack to stay aboard during this critical period of integration, I think there would've been a high level of nervousness'' among Honeywell's board members, he said.
Welch, already planning his retirement, had just signed a lease for a private office in Shelton, Conn. last week. But the deal was too good to pass up and with his experience in putting companies together, it made sense for him to stick around, Welch said.
It had nothing at all to do with a reluctance to step aside, he added. ``This is not a story of the old fool who can't leave his seat.''
GE will pay 1.055 of its shares for each of Honeywell's 801 million outstanding shares.
Shares of GE fell $2.88 to $49.63 in afternoon trading Monday on the New York Stock Exchange, pushing the value of the deal down from its initial price of $45 billion, while shares of Honeywell rose $2.94 to $49.94. Both companies are part of the 30-component Dow Jones industrial average.
Under terms of the deal, expected to close in February, GE will also assume an unspecified amount of Honeywell debt. Honeywell's corporate headquarters in Morristown, N.J., will be closed as part of the deal and about 550 employees there may lose their jobs, said Honeywell spokesman Tom Crane.
Welch made clear that the deal will result in other job cuts, but refused to talk specifics. GE employs about 340,000 people, while Honeywell has about 120,000 on its payroll.
GE is a diversified company that produces power plant parts, aircraft engines, appliances and owns the NBC television network. Honeywell manufactures equipment for aerospace systems, power generation, transportation and factory automation, as well as specialty chemicals, plastics, fibers and other industrial materials.
Overlap in some areas is expected to raise antitrust concerns among U.S. and European regulators, who could require the combined company to divest some of its businesses as a condition of approval.
GE's 11th-hour offer for Honeywell surprised many given the fact that Welch, who turns 65 next month, was expected to hand over control of the company six months from now.
While Welch will continue to guide GE until the end of 2001, he said Monday he still expects to name a presumed successor before the end of the year.
Welch is widely credited with transforming a company best known for making light bulbs and appliances into an empire that includes the television network NBC. He shook up GE's management structure and sold major business divisions, including housewares, air conditioning and semiconductor businesses.
In his 20 years as chairman of GE, profits have risen from $1.6 billion to $10.7 billion in 1999. But Welch said the deal gives him the chance for an encore.
``I could've gone home early and been a great hero,'' Welch said. ``I'm betting everything, my reputation, that this makes GE a lot better and their (individual investors') investment a lot stronger.''
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